Pelosi and Democrats with a strong hand
Posted in Uncategorized by demandside on September 27th, 2008 Plus late news of a negotiated agreement on the Bailout
09.28 Special
Hello and welcome to Demand Side Economics
I am Alan Harvey and this is a Demand Side Special presentation
for Sunday, September 28, 2008
In a moment, the only news out of the negotiating room and it says a lot.
Between the lines, I read
This statement indicates John McCain and the House Republicans are directly in line to take the blame should a bailout bill fail to emerge from the negotiations or fail to pass due to significant defections. And defections are certain, because incumbents facing a surge in voter support for Democrats. And the election is 40 days away.
It also suggests that the Democrats hand was strongly improved by the McCain - House Republican political theater. I hear guarantees that must mean Paulson has acceded to either direct equity or preferred positions on the debt.
Democrats must remember 1993, when the Budget Bill that set in motion the fiscal responsibility of the 1990s was passed and Republicans led by Newt Gingrich ruthlessly pilloried them for raising taxes, using it as the hottest of hot buttons to take the House. “Democrats have the majority. They could pass it if they wanted to,” has been the almost plea from House Republicans. It is not going to happen.
It is in the political interest of Democrats for the plan to fail and an economic collapse to follow. That would literally be the end of the Republican Party. If the plan fails and somehow the financial system gets out of it, cows will fly. If the plan succeeds and doesn’t hold things together for very long, all those who voted for it are going to suffer.
One sure indication of whether the bailout is necessary is whether it passes. If it passes, it means both parties on the eve of a pivotal election have been convinced the plan is the only bridge across a widening crevasse. Republicans have been convinced by interested parties or by their own calculations that the economy may well collapse. Republicans cannot afford economic collapse politically, and Democrats? They can afford it politically. They can afford terms which financial houses will find very distasteful. The worse the economy, the more Democrats come to Washington.
A last thought — Whatever it is, this will not be enough. While this crisis has been going on, the free market has shrunk to three mega-banks, a giant federal presence, a staggering central bank, and some feudal outposts. This is not a stable structure.
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